Senators, State Attorneys General Call on Supreme Court to Curb 'Two-Step' Bankruptcy Misuse by Rich Corporations

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As wealthy corporations employ strategic bankruptcies as a shield against lawsuits, key policymakers have chosen to fight back. A trio of concerned U.S. senators and 24 state attorneys general are urging the U.S. Supreme Court to prevent companies such as Georgia-Pacific from exploiting bankrupt shell companies to dodge litigation.

Senators Dick Durbin, Sheldon Whitehouse, and Josh Hawley have issued a passionate plea to the court via an amicus brief. Their objective is clear: overturn a controversial June 2023 decision from the 4th U.S. Circuit Court of Appeals. This ruling has paused thousands of proceedings against Georgia-Pacific due to its subsidiary Bestwall's ongoing bankruptcy. However, the senators argue that "Bestwall has created a legal stratagem that radically expands the authority of bankruptcy courts and makes a mockery of congressional intent."

"Abuse" of Bankruptcy, A Cause for Concern

Attorneys general for 24 states and Washington, D.C., have echoed the senators' sentiment. Through a separate amicus brief, these state officials have marked the 4th Circuit's decision an attack on their "authority to enforce their state laws to protect their people."

Georgia-Pacific, known as a 'unit' of industrial conglomerate Koch Industries, cleverly engineered a tactic coined the "Texas two-step" back in 2017. This strategy involved spinning its asbestos liabilities into a new subsidiary called Bestwall, which subsequently filed for bankruptcy. At the time of the filing, the company was facing 64,000 lawsuits relating to asbestos.

Both amicus briefs claim that Georgia-Pacific, whose value sits in the tens of billions of dollars, is manipulating the U.S. bankruptcy system. The allegation is that it's being used to shield its assets from those who've suffered due to its products, thus stalling lawsuits from individuals and states without filing bankruptcy.

Is the 'Two-Step' a Misstep?

The Supreme Court has not yet commented on the controversial "Texas two-step." Still, it's deliberating over the extent of a bankruptcy court's power to safeguard non-bankrupt company owners. This is due to the appeal of Purdue Pharma's bankruptcy plan. However, it's uncertain whether the court will tackle the Georgia-Pacific case.

As a preferred venue for two-step cases, North Carolina appears keen to deter companies from copying the strategy. The hope is that discouraging "abusive" bankruptcies will create a more equitable environment.

The Role of an Experienced Lawyer

Driven by a fervent desire for fairness, the initiative by U.S. Senators and state Attorneys General underlines the urgent need to review and reform bankruptcy abuse. Placing faith in the U.S. Supreme Court to make decisions that protect and benefit the citizenry reaffirms our collective commitment to upholding justice. Now is the moment to act and seek legal help.

In the war against bankruptcy misuse, investing in sound legal assistance is critical. Legal help can shed light on the intricacies of the labyrinth, potentially tipping the scale toward justice. If you find yourself grappling with such legal complexities, reach out to an experienced lawyer. With their help, justice can be within reach.

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